2021 inflation hits the middle class harder and stays below 10% for high income

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Inflation for families with a monthly income of up to BRL 8,956 exceeded the 10.06% recorded by the IPCA (consumer price index) calculated in 2021. Those with income above this level had inflation below 10%.

According to the Ipea Inflation Indicator by Income Range, inflation reached 10.40% for low-middle income families (R$ 2,702.88 to R$ 4,506.46) and 10.26% for those classified as average income (R$4,506.47 to R$8,956.26).

For very low and low income (below R$ 2,702.88), the indicator was 10.10% and 10.08%, respectively.

In the upper-middle and high-income brackets (above BRL 8,956.25), inflation was 9.66% and 9.54% in the year, according to Ipea (see all income brackets in the graph on this page).

The difference between inflation at the two extremes of income (very low and high) was 0.54 percentage points, a result well below the 3.48 percentage points recorded in 2020.

This greater difference in the previous year was explained by the behavior of services, which weigh more in the consumption basket of the richest and had a price drop in the period of greater restriction of circulation.

Researcher Maria Andreia Lameiras, author of the monthly indicator, states that, in the case of very low-income families, inflationary pressure came mainly from the housing group (3.64%), impacted by the 21.2% readjustments in energy tariffs. electricity and 37% of bottled gas.

For high-income families, the impact was greater in the transportation group (5.35%), due to the 47.5% increase in gasoline and 62.2% in ethanol.

Trend for 2022

The expectation is that the difference in inflation between income brackets will fall again throughout 2022.

The author of the indicator says that 2020 inflation was more concentrated in food, which harmed the poorest that year, due to the weight of this item in their consumption basket.

At the same time, there was a relief in the inflation of the richest due to services, which rose very little or fell in price in the first year of the pandemic.

In 2021, the rise in food was a little lower, and there was a general increase in other items, a resumption of inflation in services and a rise in the prices of high-value goods.

This year, the inflation of the poorest tends to decelerate faster, according to the person responsible for the indicator. She expects a lower food price hike and energy tariff relief. For the richest, price passes are still expected for some services and industrialized goods, which weigh more in this basket.

“In 2020 we had inflation that was much higher for the poorest and a little milder for the richest. In 2021, there was an increase in inflation for everyone. For the richest it was higher”, says the researcher from Ipea .

“For 2022, the trend is for inflation for everyone to be around 5%, with the richest a little above that of the poorest”, he said.

In December, the indicator showed a deceleration in all income brackets, with the exception of the very low-income segment, whose inflation was at 0.65% in November and changed to 0.74%.

Ipea also highlights that, last month, higher income families registered the highest inflation rate (0.82%) among all segments.

In the lower income classes, in addition to the increase in the food and beverage group, the housing and health and personal care groups also exerted additional pressure, says the institution, with emphasis on items such as energy, water and sewage, piped gas and rents (0 .65%).

Higher income families were impacted by the increase in the price of airline tickets (10.3%), transport by application (11.8%) and car rental (9.3%), which made the group transport was the main responsible for the inflation of this segment in December, says Ipea.

“The rise in personal services, especially those related to recreation, such as accommodation (2.3%) and tourist packages (2.3%) also contributed to the inflation of this class in the last month of 2021.”

goal overflow

Inflation in Brazil was among the highest in the world last year. The rise in prices surprised economists and authorities in several countries.

For 2022, the expectation is for a drop in the price index, but with the risk of a new overflow of the target, whose limit is 5%.

In the letter released to explain the overflow of the inflation target in 2021, the president of the Central Bank, Roberto Campos Neto, attributed inflation in 2021 to successive cost shocks and emphasized that this is a movement observed in other countries as well.

He highlighted that, in Brazil, there was the additional effect of the energy crisis. He also stated that, although the contribution of the exchange rate to inflation was lower than in 2020, there was a break in the historical pattern of appreciation of the national currency during cycles of rising prices of commodities exported by the country. Thus, the country was doubly affected by the rise in these products.

In the document, the BC reiterates that it will maintain the cycle of hikes in the basic interest rate, currently at 9.25% per year, to bring inflation to the target.

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